Barclays CEO Diamond grilled as bonus row builds

Reuters/London

The Chief Executive of Barclays, Bob Diamond, leaves after attending a Treasury select committee hearing at Parliament in London yesterday

Taxpayers should never have to bear the burden when a bank lands in trouble, the new US boss of Barclays Plc told British lawmakers, in a grilling yesterday over his pay as a row heats up over banker bonuses.

In a packed room which people had to queue to enter, Bob Diamond answered questions from Parliament’s Treasury Select Committee, a cross-party group of politicians assessing competition among banks.

"No bank should ever be a burden on the taxpayer,” said Diamond, who became Barclays chief executive this year after running the investment banking arm Barclays Capital for 14 years.

In sometimes heated exchanges, pay was the expected hot topic, amid public anger at British bank bonuses likely to total about £7bn in coming weeks.

Diamond defended the universal banking model that combines retail and investment banking, saying it was a "great starting position” and provided more stability.

The government is not expected to clamp down too hard on pay at the banks after a series of meetings, but instead seek commitments from them to lend to small businesses.  But Diamond—who said he was "extremely grateful” for support for the sector from regulators and central banks during the height of the crisis—said the bank could not decide how much to lend without making credit quality checks.

Demand for loans had also subsided, he said.

The row about irresponsible pay flared up in the UK again, after a weekend report that Stephen Hester, CEO of majority state-owned Royal Bank of Scotland, was set for a £2.5mn bonus.

Diamond is one of the highest paid European executives. He earned £21mn in 2007, but waived his bonus for the last two years, prompting some politicians to slam his promotion as rewarding "casino banking”.

But the new boss may opt to shrink his investment bank and other parts of Barclays with a radical shake up next month to ditch low-return assets, analysts at UBS said this week.